The Effect of Capital Structure on Share Prices based on the FTSE 100 Essay

The Effect of Capital Structure on Share Prices based on the FTSE carbon - Essay ExampleFurther analysis of the literature has revealed that anyway Market Value, the debt levels of the firm as well as the earnings offered to investors are other influential factors that mark off the stock price. This paper aims to construct a regression determine for the stock price of most FTSE 100 firms by accommodating these three parameters as variables. Further, the paper contains an elaborate statistical analysis to improve the model and remove any inconsistencies.Studies on Corporate Finance by researchers like Kevin (2006) have debated over the consequences of examining the atomization of the firms capital structure into various organizational parameters and have expressed the possibilities of analyzing their unmarried and corporal influences on the movement of related share prices and their ultimate impact on returns to shareholders. A companys capital structure consists of a multitude of assets in the form of equity, debt and other securities, each of which are include into the structure in proportions deemed necessary and sufficient by the firm.Studies by Modigliani and Miller (1958) conducted studies which demonstrate that in scenarios where the investing decisions are fairly stable, the market value of the firm stands invariant to its capital structure composition assumptive that the financial markets are perfect in nature (i.e., markets comprising perfect competition and no friction) and provide tax-free returns.Further, Kleinbaum (2008) has shown that in cases where there is an additional component of protective debt covenants, the market value of the firms securities is not influenced by any changes in the capital structure. However, the value of the firm and the invariance of the security values shag be vulnerable to taxation both at the firm as well as individual levels. This is also true in the case of debt covenants that are